ECB Tells Belgium Not To Backstop Dexia Interbank Deposits, Says Bailout Plan May Be Against The Euro Charter

If anyone is surprised that things in Europe will get massively surreal before this is all over, we suggest finding another thread. In the meantime, for the latest example of the utter chaos and "make it up as we go along" we go to the ECB which has just, in very polite terms, warned Belgium that its bailout-cum-nationalization plan may not be quite feasible. From Bloomberg: "The European Central Bank advised Belgium not to backstop Dexia SA’s interbank deposits and to avoid providing guarantees on debt maturing within three months because it risks interfering with the central bank’s monetary policy." Reading between the lines here, it means that the ECB is effectively telling national governments to not try and become their own central banks under the ECB's umbrella, which would likely result in not only in various sovereign downgrades (that is guaranteed) but in loss of conviction in the European Central Bank, something which the insolvent European continent and the insolvent hedge fund in its core, aka Jean-Claude Trichet Capital et Cie. which holds hundreds of billions of Greek bonds at par, can certainly not avoid. It gets better: "The ECB also said the planned debt guarantees for Dexia may last as long as 20 years, which is inconsistent with European Union guidelines for national support measures to be temporary in nature, according to a statement published on the Frankfurt- based central bank’s website and dated Oct. 13. Belgium sought the ECB’s opinion on draft legislation that would grant state guarantees on Dexia loans." Oops: the ECB may have just scuttled the currently envisioned Dexia bailout plan. Oh well, just like with the Greek 50% bond haircut, so here to it is now back to the drawing board.

More from Bloomberg:

Guarantees on interbank deposits “could entail substantial distortion in the various national segments of the euro-area money market by potentially increasing short-term debt issuance activity across member states,” the ECB said in the statement.“It could also affect the transmission of monetary policy decisions.”

For those who may have already forgotten last weekend's key event, now largley forgotten and priced in, "Dexia obtained a pledge from the governments of France, Belgium and Luxembourg last week to backstop as much as 90 billion euros ($125 billion) of interbank and bond funding with maturities of as much as 10 years until 2021. The French-Belgian municipal lender, which is being broken up after concern over its European sovereign debt holdings caused short-term funding to evaporate, sought state guarantees to finance long-term assets including 95 billion euros of bonds with an average maturity of almost 13 years at the end of June."

And the ECB just said that this whole plan may be against the Eurozon'e charter.

Good work guys. One can be 100% certain the rating agencies are following this with great interest.

What the fuck do you know about the topic at hand? Anything? Anything, at all?

Are you part of some sort of competition of who can post the most banal comments on a forum in a single day? Unwaveringly, every day you post dozens and dozens of the most banal comments I've ever seen.

He is not a libertarian, but rather a statist nutbag who started off trolling Republicans here as "Red Neck Repugnicant", but changed his name each time he was irretrievably humiliated by liberty loving individuals such as myself to the point that he finally switched the sole focus of his entire life from trolling republicans where they don't exist to trolling libertarians.

Also note that he is a psychopathic stalker who tracked down people that worked in my lab group and tried to badmouth me to them. Luckily he was so stupid that he picked the former member of the team who has age related dementia. Otherwise I might have been in "trouble", lol.

I bet a SAE that when they hold the press confernece it's called a 'support role' and that they say the US isn't really involved. BTW, the leader of the Lord's Resistance Army is Joseph Kony. Kinetic action anyone?

You don't have to have a clue when the rules don't really matter in the first place.

There are so many things being done this days just because they "seem right" to a select few. Question the paths taken and you will bring about the end of the world. We're dismantleing the Constitution the same way.

no way...there will be some sort of a bailout this weekend...Qatar putting money into Dexia or more likely the ECB buying anything that isn't nailed down because they don't even need euro notes to do so. All their electronic 1s and 0s should buy everything very nicely.

speaking of, I'm ready to issue a CDS on the ECB and the Fed. Anyone buying?

ecb doesn't want to take on the market alone while govt shills try and place their fig leaves in place in helter skelter race to deadline. The three stooges couldn't have a better act than this one. It looks like the cabin scene in Groucho Marx film..was it day at the races or duck soup?

The Zimbabwe-esque money-printing orgy continues which is indeed BULLISH for ANYTHING not denominated in Federal Reserve Notes ($U.S.), Euros, C$, A$, Yen....We must NEVER underestimate the replacement power (in fiat) of stocks within a MASSIVE GLOBAL re-flationary spiral. AAPL goes to $2,000 per share which is great - but a loaf of bread costs 25 times as much. Shorting stocks (going uber-long fiat) is going to be a DISASTER trade for the headline readers. BUY BUY BUY....

See? The market didn't start this huge bear market rally because of solved plans in Europe: it started before any supposed plan of a new plan of a new plan due by the end of the month so says Merkozy. The entire ramp--rember gold and silver were left behing and the only reason for a stock ramp job would be becaue of confetti paper duplication, started because the despots had to do something quick before OWS took on an immediate and even larger meaning.

Today there was BIG stress in French and to some extent Belgium Gubbmint bonds. France-Germany 10 year spread widened to euro-era record and Belgium's CDS pushed to record too. After ECB started it's now daily monetization of Spain and Italy, Belgium's cash bonds erased some of the losses. But the most important thing was that ECB monetization DIDN'T stop the meltdown in France. Of course the clueless equity complex ran to the hills and shouting "be merry" but things are getting serious if (lol) France will keep getting hammered.

It looks like the rules are changing all the time and now the EU is a clusterfuck of organization that is chasing the wide wild circles to get to the simple end conclusion: it's broke both from a financial and moral standpoint and it will fail.

See again? The market not only doesn't drop on this but the same ramp job that takes place during power hour is here yet again! Unbelievable no one calls this shit out for what it is: total manufactored rally by TPTB.

There must have been a threat to shareholders somewhere in the deal. There must be no nationalization of banks, just bailouts and stalling please. We can't have TPTB foot the bill, that would be unthinkable.

I am not qualified to say to be honest - if this involves a subsequent default on the euro shadow banking system it will be great in the long term - maybe the ECB needs to be seen to act fair to prevent a peasants revolt..............I just don't know what is going on in their minds but I doubt it - still saving your skin can change peoples minds.

You're probally right - but its hard to get into the head of bastards that bad sometimes.

Euros can be produced for real productive activity to prevent defaltion - I am always banging on about a tram for my town for instance - the CB gives us Euros , we buy a French tram , we reduce our oil imports , we sell butter to Fatter French workers etc etc............. ok ok maybe we sell the stuff to Germans as the French farmers.............. I always thought that was productive trade for some funny reason.

I've heard of and dealt with a number of folks with serious alcohol and drug adictions well as others with pretty strange and disturbing mental problems, but this takes the cake. It's like the EU/ECB's medulla oblongatta has been severed so that the right hand really and truly has no fucking clue what the left hand is doing.

debt is the key to financial prosperity. when external and internal debt level rise, debt tolerance shrinks, and economies are locked out from long/term funding.

solutions? debasement of currency (does not work with fiats). inflation? does work, but creates massive civil unrest and leads to intergenerational funding conflicts. default? once down that road, you can kiss potential creditors good/bye (you probably still get ST, but at very high costs, and that ultimatively bankrupts you).

This is CLASSIC - Every permabull on CNBC is now talking "caution" which means they all got flushed out last month into the orchestrated takedown. The left-behind-bulls are whining and the annihilated shorts are wailing in agony.

Roasting the shorts! What a great and absolutely NOVEL thought!

Never underestimate the replacement power of equities within a Weimar-revisitation!

"Eurogroup chief Jean-Claude Juncker said on Friday that banks must be aware that unless the voluntary agreement of bondholders is sufficient, then the target will be for a non-voluntary participation of the private sector."

it's called turning private debt into public debt. it's double bad for your ma: first she gets fucked on her investment, and then she gets fucked bc the bill will be picked up by the gov. you think that greece will ever get creditors to give them money LT? and who will pay for the poor suckers (yes, i would notlike to live in greece now)? more debt for good old europe, and down the drain with any future public spending (and not just the fun stuff like new autobahnen, but health care, retirement benefits, unemployment services, schools etc).

Does "non-voluntary participation of the private sector" apply to "paying income taxes"? And did the bondholders of GM and Chrysler get to agree voluntarily to take a 100% (or whatever it was) loss just to benefit some unions?

Wonder how Phoenix Capital is doing "protecting portfolios" from the meltdown? I don't see him pumping his "The Sky is Falling" newsletter much this past week...he must have been slaughtered being short this wonderful rally.

I'm not the one who composed the article you semi/fully retared oaf, I merely copied/pasted the content because I thought that it would be useful information.

Since I do not possess the link anymore, I am redirecting you to Bloomberg's search facilities, which you can use to confirm your "my link is full of shit" theory which you are then more than welcome to share within the current public forum, or sue them.

Dear guys although we love a lot your backstop offer in the amount of 54.45 billion euro (plus interests and ancilliary costs) we think that the deal may be too generous. In particular, we really hope that you are not intending to substitute the ECB with Dexia when it comes to gathering and ensuring the deposits placed by banks. It is rather clear that the ECB deposit rates can not compete with those that would be set by Dexia (unless something happens to the guarantor). Moreover, we are a little bit concerned with your "kicking the can" laser sight. We are proposing to squeeze your current wild target range 0-20 years to the customary 3 months -3 years. Otherwise you can kick yourself with the can in the face, or shoot it to the moon and there will be nothing to kick around anymore.

Other than that everything is splendid and we hope that you will not wake up the State Aid Commissioner.

SUDDEN DEBT???? WHERE ARE YOU? I MISS YOU!!! EVERY TIME THERE IS A POST ABOUT BELGIUM I SCROLL THROUGH THE COMMENTS IN SEARCH FOR YOUR AWESOME CAPS AND GREAT COMMENTS. SO EASY TO SPOT THOSE CAPS, ESPECIALLY IF SOME OF IT IS BOLDED. I LOVE YOUR CAPS, I MISS THEM. PLEASE COME BACK SUDDEN DEBT. PLEASE. HELLO? SUDDEN DEBT? HELLO... ? WITHOUT YOU I FEEL SO ALONE, LURKING ON ZH, TRYING TO LEARN SOMETHING ABOUT WHAT'S GOING ON IN THE WORLD. HELLO? SUDDEN DEBT? HELLO... ? ARE YOU THERE? HELLO... ?

I don't see the problem ... I mean just today DB CEO Ackermann told Maria Bartiromo that Deutsche Bank is well capitalized with almost no exposure to "The South", that there is "absolutely" no problem. If he said it, it must be true. I mean Period, End of Story!

It is against the charter but everyone are looking up in the sky whistling past the graveyard. Because they know the laws they made hamper them from manipulating the economy which they made the rules in order to protect.